The government should make it mandatory for large companies and asset owners – such as pension funds – to report their exposure to climate change risks and opportunities by 2022.
That is the conclusion of the Environmental Audit Committee in a new report on Greening Finance published today.
There is growing international momentum behind moves to encourage financial reporting on sustainability. The government has endorsed international recommendations on climate-related financial disclosures and says it has ‘encouraged publicly-listed companies’ to implement them.
However, Ministers do not appear to have taken any specific actions to do this.
Labour MP Mary Creagh – who is Chairman of the Environmental Audit Committee – explained: “We need to fix the incentives in our financial system that encourage short term thinking. Long-term sustainability must be factored into financial decision making.
“Climate change poses financial risks to a range of investments – from food and farming, to infrastructure, construction and insurance liability. The low-carbon transition also presents exciting opportunities in clean energy, transport and tech that could benefit UK businesses.
“We want to see mandatory climate risk reporting and a clarification in law that pension trustees have a duty to consider long term sustainability, not just short-term returns.
“The government should now issue guidance immediately making clear that the Companies Act 2006 already requires companies to disclose climate change risks where they are financially material.
“And the Financial Reporting Council’s (FRC) Corporate Governance Code and UK Stewardship Code, and the Financial Conduct Authority’s (FCA) listing rules should likewise be amended to require climate-related financial disclosures on a comply or explain basis by 2022.”
5 Jun 2018